Green Chip Stocks

China's Renewable Energy Boom

National People's Congress Presses Utilities for Integration

With 2010 just around the corner, evidence is steadily mounting that this will be the year of a Chinese clean energy boom like none we've ever seen.

This past Saturday — the day after Christmas — western investors as well as ones based in the Middle Kingdom all got a gift from the National People's Congress in Beijing...

A Lump of Clean Energy in Your Stocking

In a country where the bulk of electricity still comes from coal-fired plants, the NPC has decided to supercharge the Renewable Energy Law passed in 2006 by demanding that every bit of renewable energy capacity generated in the country's hinterlands be connected to commercial grid networks by major utilities.

Electricity networks that do not integrate clean energy into their power delivery mechanisms with haste will face major fines. From here on out, the burden of getting China's green power percentage to 15% by 2020 will rest squarely on the shoulders of grid administrators — not on wind and solar power plant operators.

Local industry analysts say that up to one-third of China's current clean energy capacity is not tethered to utility grids. Having spent time in China's western reaches, where natural resources from coal and silver to wind and sun are bountiful, I don't doubt for a second that they're having trouble linking far-flung raw power supplies to the central and eastern cities where more juice is sorely needed.

In China, as in the United States, regional utilities tend to operate too independently for a large-scale national clean energy rollout to be implemented smoothly.

In China, the central government in Beijing does pretty much what it wants. Like it or not, the nucleus of power in that still-Communist country can catalyze market changes with more force than D.C. policymakers ever could.

At the Copenhagen Climate Conference, Chinese negotiators showed up with major carbon intensity reduction targets in hand: they intend to cut carbon output per unit of GDP by 40%-45% before 2020, based on 2005 levels. Officials are also maintaining their raw target of a 15% clean energy portion of total electricity generation over the next decade, up from 9% today.

China's sitting on a massive surplus of money that they use primarily to buy foreign assets like U.S. Treasury bills, but the combination of Communist Party authority and filthy lucre can be used domestically to ensure that the carbon intensity and clean energy targets are met and exceeded.

While we dance around hard-charging grid connectivity plans here in the States, the Chinese know that smart grid technology like intelligent load metering can only be maximized if all resources are linked to end-users in residential and commercial areas.

This new mandate for clean energy grid integration in China is part of a big picture that energy companies and investors are all optimistic about heading into 2010.

China isn't just linking power supplies — the government just announced plans for 42 high-speed rail lines that will run nationwide at an average of 217 miles per hour. Speed is known to be a key factor in pulling commuters and long-haul transit customers out of their cars and off of planes, both of which are heavy polluters that will hamper China's carbon intensity targets. So Beijing planners are committed to getting rail done right.

Even more broadly, the Financial Times reported on Tuesday, December 29, that China-focused equity funds took in $6.8 billion in 2009, leading emerging markets in absorbing a record amount of investment inflows during the year.

That's right — while the rich-country recession hasn't come to an end, investors have positioned themselves to profit from faster and more robust recoveries in China and other rapidly-developing economies that are instituting smart growth policies.

Nick pointed out that electric vehicle companies Hong Kong Highpower (NASDAQ: HPJ) and China BAK Battery (NASDAQ: CBAK) have delivered extraordinary gains in 2009, proving how broad the green stock spectrum is in China. Best of all, China's top clean energy companies are bringing shares to Wall Street on a platter.

It's not too late to get in on the action... not by a long shot.

You can learn more about the next frontiers of green investments withGreen Chip International. We just completed our year-end review, and if you sign up now you can get up to speed on our entire strategy for 2010 and where we've taken gains in 2009.

Happy New Year!

Sam Hopkins

International Editor

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